Wednesday, January 1, 2014

Happy New Year!

Year of the Rains

"It won't be long before the rains come
and the ground begins to open…"

Let me start by saying that I do not have a crystal ball, but I do have a lens. My lens is Freegold, and it is quite simply a paradigmatic framework in which to view events past, present and future in a different light. Events that defy other frameworks of understanding and confound their proponents, requiring either complex conspiracy theory explanations or else fluid foundations that must shift every time the wind changes directions, make perfect and simple sense with this lens, which is why I take its necessary conclusions so seriously. Once again, here is one of my favorite quotes from FOA:

FOA: "I (we) expect none of you to consider anything said here as credible. Everything is given as I understand it. If you came with a notion that I am someone who sees the future, grab the children and run far away. For these Thoughts, and my ongoing commentary, are meant to impact exactly as the "gentleman" said they would. People hear them, and whether believed or not, the words leave a mark. A mental mark on the trail, if you will. And later, after the world turns, our little "stacks of rocks" will be easier to understand next time you are passing this way. In fact, your ability to find your own way will forever be enhanced for having seen this path in a different light."

Last year's New Year's post began with this: "It is tempting to believe that extraordinary events must have been carefully orchestrated by someone. This is the main ingredient in conspiracy theories—denial that extraordinary events are caused by the ordinary.

The reason I bring this up is to help you put Freegold in the proper perspective to understand my use of the term "window" as in "window of opportunity". Freegold will certainly be a high impact, extraordinary event as I understand it, and completely unexpected by most people. But that doesn’t change the fact that it could be, and was, seen coming a mile away.

Extraordinary events are caused by the ordinary all the time, and Freegold will be a good example. It has been rolling in like the tide longer than most of us have been alive. If there was a "conspiracy" surrounding Freegold, it was a conspiracy to forestall the inevitable, by those who had the most to gain, until structural foundations could be retrofitted enough to withstand the storm of transition.

With a long view, we can see several times when massive amounts of resources were expended to keep the wheels on the bus at times when it looked like they were falling off. A popular view is that central bankers do this to retain their own power and influence. But a different view exposed by the Gold Trail reveals that it was being done for a purpose: to buy time in order to retrofit the system to withstand the inevitable transition to Freegold."

"Everyone knows where we have been…"

I dubbed last year the "Year of the Window" which was speculation pertaining to a theory that Aristotle developed beginning around 2005. The basic theory goes like this:

The current system is old and fragile, like a crumbling edifice with minimal, but necessary, structural support. Picture an old brick building with basic earthquake retrofitting, more for the perception of safety required by its residents and to meet public building codes than for actually surviving a serious disturbance.

Brick wall with earthquake retrofitting

The current system edifice has two main structural weak points, both of which require support, and either of which could bring the whole thing down on its own. The two weak points are the overvaluation of the dollar and the undervaluation of gold. If you think gold rose in real terms over the last decade, you're wrong. It didn't. The price of an ounce of gold when the bull market began in 2002 was about 13 barrels of oil. Today it is 12 barrels of oil. In 1999 it was 17 barrels of oil and in 1998 it was 24 barrels of oil. The real price of gold is lower today than it was for most of the time that Another and FOA were writing. But it's not the price that is the problem, it's the flow of physical at that price which requires support.

As for the dollar, it has been overvalued for a very long time. It's a long explanation as to why the dollar is overvalued which I'm not going to go into at length here. But it's basically like this: Saved dollars are backed in extremis by the ongoing net production of the American economy, only America hasn't been a net-producer in a really long time. Not only that, but the sheer amount of dollar-denominated assets existing in a world that has been systemically hoarding and reserving dollars for more than 90 years is above and beyond what even the most productive economy could produce in surplus over generations. It's a systemic flaw "which, when people become aware of it, will be viewed by history as an object of astonishment and scandal."

Again, both of these structural weak points need support, not just one or the other. Either one could bring the whole system edifice down. And please don't be confused by "the undervaluation of gold" as one of the weak points. Again, the weak point is not the price, but the flow of physical at that price. So if the central banks wanted to support the current system, they wouldn't do so by suppressing the price, but by supplementing the flow. It's really that simple.

Structural support for the dollar is equally simple. In order to support the global system edifice, foreign net producers need to continually hoard and reserve more and more dollars to keep the dollar overvalued in real-production terms. Not financial terms, mind you, but in real goods and services imported by the United States. From 1980 through the turn of the century, structural support came primarily from Europe, and from 2001 through 2013, it came mostly from China. I wrote about this structural support for the dollar side in Inflation or Hyperinflation:

This is the structural support that holds the whole system together: foreign CBs perpetually gorging themselves on Treasuries. It's not that they might sell their stock of Treasuries. The real threat is that they might slow or stop their rate of accumulation relative to our rate of emission.

On the gold side, support for the flow of physical has two components or "legs": the commodity gold market component and the official CB component. From the early 80s through the turn of the century, the gold price was on the decline. The flow during that time was enabled and supported by the CBs backing the gold mine forward hedging part of the commodity gold market with their own gold to keep the mines producing and, toward the end of that period, by making deals with one or two of the world's largest physical gold consumers, "Oil" and "Big Trader". Ultimately, however, the CBs had to become the primary suppliers themselves.

You can read more about this support for the gold side in Checkmate:

Apparently, according to Another, even all of the new gold coming out of the mines each year was not enough to satisfy the East's taste for physical without an eventual revaluation.

ANOTHER: To avoid a spiking oil price the CBs first freed up the public's gold thru the issuance of various types of "paper future gold". As that selling dried up they did the only thing they could, become primary suppliers!

The west to east gold flow comes from three basic sources: Western dishoarders, Western gold mines and Western CBs. Think about these three sources in terms of support for the flow of physical at the commodity gold market price. Obviously gold mines are an important—although not the only—component in that structural support, and therefore the profitability of gold mining is an important element. But in the absence, or at least reduction of flow from the other two sources, mining becomes a relatively more important leg of support for the current system edifice.

One thing we learned from Another was that back in 1979 the BIS resolved to extend the dollar reserve system for a while. This resolution included the expansion of the paper gold market through CB leasing and gold mine forward hedging, so that the mines could increase the amount they were producing each year without a change in the price. In 1985, global mining production was at about 1,550 tonnes per year.

It is only through Another that we learned what they (the BIS, meaning the European central bankers) hoped and expected would happen, which was a five-fold increase in the flow of gold from the mines. Even if Another was exaggerating a little in that statement, which I doubt, the disparity between what he said they expected and what actually happened is so vast as to leave plenty of room for exaggeration without affecting the point of the statement.

A five-fold increase would have meant the mining of 7,775 tonnes per year, but what actually happened was that global production plateaued at about 2,550 tonnes per year in 2000, and stayed there. There are probably a number or reasons for this, but one of them is surely that, even as technology improves, the efficiency it provides is offset by the declining marginal grade of the ore that is uncovered.

The point is that this is quite possibly the natural peak level of new gold production. And that "peak" would have been nearly impossible to predict back in 1985, although 7,775 tonnes per year does seem wildly optimistic, which makes me wonder how and why they came up with such optimistic expectations. Another explained it thusly: "Don't ask where they got this, as they are the same people that bring us government finance and such."

Sometimes I wonder if that "five times over" was what they figured at the time as being necessary for Western mining to eventually become the primary supplier of the eastward flow, since Western dishoarding had its obvious limits. In any case, the variance between estimates and actuals is well-established, though not usually that far off. (Note that, while European CBs had most of the official gold reserves, Europe has only 2% of the unmined reserves. Most Western mining supply comes from dollar bloc countries like the U.S., Canada and Australia, plus South Africa. So if Western dishoarding dried up prior to Freegold, it was preferable to the BIS for Western mining to pick up the slack rather than the European CBs.)

Here's something interesting that Another wrote in February of 1998: "When we speak of these [Giants] one must know that they purchase much larger amounts than Berkshire. Most cannot understand that it is difficult to take five or ten million oz./gold in physical in a month or less… At this time the market is very, very tight for large money to go into physical. Paper, yes! I could move five billion US into paper metal very fast, but not physical."

What's interesting about that paragraph is that it gives us a rough size for the Giants he was talking about. 5M ounces is about 150 tonnes, so he was talking about 150-300 tonnes per month. Obviously there are not too many Giants of that size, but even one Giant taking the average between 150 and 300, or 225 tonnes per month, would require 2,700 tonnes per year. Gold was $300/oz. at that time, so he was talking about a Giant with $1.5B-$3B in surplus currency per month to convert into physical gold. 7,775 divided by 2,700 is less than 3, so there can't have been more than two such "Giants" in the world (plus the "third world no ones") that the BIS was concerned about. My guess is it was "Oil" and "Big Trader" (the Middle East and the Far East, or more specifically, the Saudis and China/HK) plus the "third world no ones" that the BIS thought required, in aggregate, that "five times over".

Here's something else interesting that Another wrote around the same time: "The central underlying questions from the beginning of these "Thoughts", was always, "will the CBs become the primary gold suppliers in the continued support of low oil prices" and "will the oil producers accept a world gold market that supplies only "non-mined" gold"?"

Why "only non-mined gold"? That's because, not only had the gold industry failed "to expand production some five times over" in the preceding decade and a half, but the price of gold had recently fallen below the cost of gold mining for the first time ever. This, I think, was the primary reason that Another showed up in the first place. The first to appear was "Big Trader" in December of 1996. In November of '96, gold had dropped from $379 down to $371, and here's how Another later paraphrased Big Trader's comment:

"This was not far from the time that "Big Trader" said that "if gold drops below $370 the world would see trading volume like never before seen". The rest is history. Now the CBs will have to sell 1/3 to 1/2 of their gold just to cover what's out there. To use the Queen's English "it ain't gona happen dude"!"

Another wrote that in October of '97, then in November he wrote this:

"How will this all end? As the CBs never sold much of their gold, they are still locked to the deals thru the BIS. In the real world it was stocks of gold outside the governments [Western dishoarding] that got traded. And that trading multiplied many times. Today, more gold is traded than exists! This paper today, has become the "gold pricing standard" without backing. There is no way out! As we have now reached production cost, we have reached, "THE END"!"

So apparently $370 was an important price level at that time, probably related to the profitability of the Western gold mining industry, because below that level, Another said that the CBs would have to become the primary suppliers. And apparently they did, for a while. Here's more from Another in March of '98:

"On March 18, the Belgian Central Bank said it sold 299 tonnes of gold last week. This sale/purchase was ongoing, completed and announced during the time frame of my post ( of Date: Mon. Mar 09, 1998, 07:55 )

This purchase was completed by the BIS for its account and held in five CBs. It was made at appx $305us. As this transaction was made public within the 5 to 10 day time frame, did that mean gold would move to its new range of $320/$360 in that time also? No. What it does show, is that the BIS has made a decision to "no longer support the LBMA gold paper with CB gold"!"

So there was some CB support in '97 and '98, and then the BIS announced in the WAG in '99 that it was strictly limiting future gold sales and leasing operations. That's when the BOE ponied up another 400 tonnes at Brown's Bottom.

The point I'm getting at is that it was ALL about that price at which gold mining is profitable. Apparently that was somewhere between $320 and $370 in the late 90s, and when the POG spent a good portion of '97-'01 below that level, the CBs had to become the primary suppliers to the eastward flow. Of course that's not to say that the mines shut down during that time. They didn't, because they had already hedged many years out.

What we can see in hindsight, when looking back at this period from 1979 to present, is that the price of gold has roughly tracked the cost of gold mining that whole time. From 1979 through 1996, the POG was a little above the cost of gold mining, yet the mines were able to expand production by developing new technology and new locations with funding from forward sales, the sale of paper representing the gold that was still in the ground.

Then, 1997 through 2001 was a stressful time on the system and its central banks because the POG spent a considerable amount of that time below the cost of gold mining, forcing the European CBs to support the crumbling edifice of sub-$370 gold flow from '97-'99, and the BOE from '99-'01. Coincidentally (or not), that was the same time period that Another and FOA were posting.

Then, from 2002 through 2012, the POG was once again a little above the cost of mining. And now, during most of 2013, for only the second time in all of history, the price of gold was consistently below its production cost. Notice, very roughly, that from 2001 through 2012, the nominal POG and the nominal cost of energy (oil) both rose around 5X. Oil rose from roughly $20/bbl. to $100/bbl., and gold rose from $300 to $1,500, roughly the present cost of sustainable gold mining.

During that same time period, another 30,000 tonnes of gold were mined and added to the above-ground supply. That's roughly the same amount of gold as is held by all of the CBs combined. So while that amount falls short of what even a single Giant absorbing 225 tonnes per month would have required, it is still a significant amount of new flow, with the 1,353 tonnes that eventually made it into GLD representing less than 5% of the decade's total.

Today we have reports that suggest China, alone, may be importing around 2,000 tonnes per year. Oil is still at $100/bbl., and the POG is probably a good $200-$300 below the magic number for sustainable gold mining profitability, only this time the mines are, by and large, not hedged, the CBs are apparently not interested in becoming the primary suppliers again as they were in '97-'01, and the Western investor/trader mindset has had it with the paper gold market.

I'm trying to give you the general overall picture of what I mean by structural support for the crumbling system edifice so that you can see how it was removed, precisely, in 2013. It's not any one thing, but a combination of many. On the gold side, support for the flow of physical includes both official and unofficial (or market) components. The official component is the CBs, and the market component is the Western dishoarding of physical while also embracing the paper gold market enough to keep Western mining profitable.

From 2002 through 2012, Western investor sentiment toward paper gold was high (gold peaked in euro terms in September of 2012). In 2013 it was low. From 2002 through 2012, gold mining was profitable. In 2013 it was not, and some mines simply quit. If the sources of eastward flow of gold were hampered or reduced in 2013, we'd expect to see something, or at least I would. Perhaps we'd see the CBs max out their self-imposed 400 tonne per year gold sales limit. But we didn't. What we did see in 2013 was the draining of 550 tonnes from GLD.

Above I wrote, "…so he was talking about a Giant with $1.5B-$3B in surplus currency per month to convert into physical gold." GLD's loss averages out to 45.8 tonnes per month. At the average POG last year, that's about $2.1B in physical gold, per month, that left GLD and went somewhere in 2013.

Back around 2005, Ari started noticing European central bank policy references to the year 2010, which he interpreted as a general time frame in which a window might be opened (structural support removed) such that a natural transition of systems could occur with minimal disruption thanks to preparation and foresight. Then, following the 2008 global financial crisis, he looked for signs that the time frame might have been pushed back. In late 2010, he wrote in an email: "As for the new timeframe, I'd say that the reported EU plan "to make private bond holders shoulder some of the pain from any sovereign debt restructuring after mid-2013" is as good an indication of a benchmark as any I've seen."

This is the basic theory on which "2013 – Year of the Window" was based. You may not believe that the current system is fragile, and therefore needs support, but the BIS, the European central bankers, have believed it since at least 1979, and have acted accordingly. If Another is to be believed, they were worried that the launch of the euro, combined with the withdrawal of their support for the dollar and the gold market in 1999, would usher in the new Freegold paradigm right at the turn of the century.

That didn't happen for the reasons I have explained (the BOE, China and the commodity bull run), and by 2005 they may have noticed some adjustment to their new Eurosystem that they hoped to implement before the transition did ultimately occur. That sentiment may have been what Ari picked up on. The 2004 renewal of the WAG/CBGA reaffirmed the same limitations on support laid out in 1999, but the subsequent 2009 renewal lacked the limit on gold leasing. Perhaps this was a reflection of some renewed purpose for extending their support at that time.

In any case, following Ari's theory, I kept my eye on 2013, and one year ago today I asked the question: "Will 2013 be the year of the window?" To answer that question, I proposed a test:

"If the recorded price on Friday, January 4th, 2013 is EUR 1,246 or lower, it's game on for Freegold meaning that the window of opportunity is now open because official support for paper gold has apparently ended. In other words, there may be no system support the next time something breaks. But if the recorded price on January 4th is EUR 1,389 or higher, it's six more months of kick the can. And if it's anywhere between EUR 1,246 and EUR 1,389 (which it is today) then the €PoG will be too ambiguous to be predictive one way or the other."

Of course there was nothing magical, scientific or even mathematical about my test, it was simply me looking for an unambiguous sign—or at least a significant indication—one way or the other, in case there was something to Ari's theory. And yes, I do believe there is something to his theory. But as it turned out, the January 4th snapshot came in at €1,261.18, delivering mostly ambiguity and no definitive confirmation either way.

So was 2013 the Year of the Window as I suspected? Well, as the year unfolded, it sure appeared to be!

New Year's is that special time when we look back at the year that was, and forward to the prospects of the next. Looking back, 2013 was quite a remarkable year. Over less than one week in April, the price of gold tumbled $200, from $1,575 down to $1,375. As I said, the first ECB snapshot of the year was €1,261.18, and 6 months later it was down €341, to €919.92. 550 tonnes of gold were drained from GLD, over 40% of its inventory built up over eight long years, gone in one! Also in 2013, we witnessed what is apparently the end of structural support for the dollar!

Now see if you can spot the trend, and the dramatic change in 2013, in the following data. In 2010, the U.S. trade deficit was $498B, and foreign official holdings of Treasury securities that year grew by $456B. In 2011, the trade deficit was $560B, and foreign official holdings of Treasuries grew by $426B. In 2012, the trade deficit was $540B, and foreign official holdings of Treasuries grew by $386B. Of course the final numbers for 2013 aren't in yet, but here's what it looks like. The trade deficit in 2013 will probably be around $485B, and foreign official (that is, foreign central banks, i.e., "structural support") holdings of Treasuries grew by a mere $20B through October, $24B extrapolated through December. Here, I made you a handy chart to help you visualize it! :D

Let's take a quick look at some of the other remarkable charts from 2013:

That last one is a chart of every single quarterly snapshot since New Year's 2002. It's a little bumpy because, on shorter time frames, you pick up some of the market's normal volatility. Personally, I think the chart of yearly snapshots is much more useful in identifying any significant change in the larger trend:

So was 2013 the Year of the Window as I suspected one year ago today? While the year got off to an inconclusive start, I'd say that, in the end, it played out rather decisively. But you decide for yourself. Can you see how the structural support of the last 30++ years, as Another and FOA explained it, was gone in 2013? That's what "Year of the Window" meant. The window is now open.

"Everyone knows where we have been.
Let's see where we are going!"

This is the part where I post a bunch of A/FOA quotes and you try to spot the recurrent theme! ;D

ANOTHER (10/17/98; 22:57:24MDT - Msg ID:638)
Every season has the special feel to the skin and this winter will bring the sand storm as not before. It is not our place to change this weather, rather to wear the correct garments. I have always found the winter, it does change much too quickly for the traveler with all clothes. These traders will not move with the speed of sand and will find no shelter in paper skins. If the gods be gracious, these seasons will change slowly, yes? Thank You

How long do persons continue to make these paper claims to "bonds", "stocks" and "currencies" that are produced in numbers as the leaves on the trees? These seasons of spring and summer of twenty years time, have offered a harvest to gather wealth that lasts for centuries. When the economy of the dollar, becomes as your "Autumn" and arrives suddenly, they will pause from this foolishness. In that time, the savings for the future of their children will be as these dried "leaves" of winter, blowing in the wind!

Date: Thu Mar 26 1998 00:35
Time passes, thoughts change, people consider and value is perceived differently. Persons say, "the seasons are all the same", but we know "the weather is never the same". A storm approaches YOUR SHORES from across the pacific!

Date: Sun Apr 26 1998 00:06
Political, legal and military "currencies" do come and go with the "Seasons", but "gold currency" did keep promise for citizens of changing times!

Date: Sat Feb 07 1998 18:45
Without speaking in parable ?
Buy physical gold and hold it close. Real wealth can not know time, it is good for all seasons. It will buy you honor during a time without truth!

ANOTHER (12/2/99; 18:06:06 #20082)
These years be right for ones who save gold. One good ear knows meaning of wind in trees. The leaves come down as seasons change. Fools see falling price of gold as "death of tree", they chase its price as leaves on the ground. Know you all, it is the season that has died.

Time will prove all things. Ones of simple thought, such as I will save the wood, not the leaf as they buy the gold, not the price!

Trail Guide (02/11/00; 17:21:28MDT - Msg ID:25055)
Our use of digital currencies for trade always flows like a river that's strong and wide,,,,, and it always flows to its end in the sea. The water takes it into the air and rains it again upon the headwaters for another trip,,,,,a new currency starts again.

Trail Guide (10/17/00; 06:31:36MT - msg#: 39207)
So, every investment era has its beginning and end. We (I assume you are a bullion holder like myself) can stand back and watch this paper gold system dissolve while gold the real international currency moves on. Our wealth in gold, whether large or small will weather this storm and produce some spectacular gains for our living standard. All because we made the hard choice to stand aside the misguided torrent that was an unavoidable river of Western thought.

FOA (12/02/00; 11:40:02MD - msg#49)
I believe this storm will become worse as many paper assets are buffeted by its destructive winds. During this time the transition of currencies will place a more proper price on all the paper values we now hold to be so true.

In this light we should know that our real things in life will not change all that much. Your tools, chairs, clothes and cars will remain yours. Houses and land, TVs and boats, all will retain the exact same "value" they always had. What will change is our ability to use our currency and paper assets as a medium to measure the "real value" that's always so inherent in these items, yet so well hidden in our perception of today. Yes, the currency price of things will greatly change, even as their "use value" moves little. Such is the nature of dying paper money systems. Such is the ending of a currency timeline!

Trail Guide (2/24/2001; 7:15:55MT - msg#: 48858)
Storm clouds are blowing in and I want to walk with a few private friends before the wind. Never know, might have to board up a window in the thick of it. (smile) OK, be back when able.


ANOTHER (04/14/01; 18:08:54MT - msg#: 51887)
Walk the gold trails of my good friend, do I. On my feet are "strong sole" of thick leather, purchased with much knowledge of physical gold. These shoes not go bare before our journey is done. On trail I see your "thin sole" gold investments cast aside and scavenged by beasts. Their owners walk no more as these investments took not this hard road of dollar transition. Many more will wear paper gold wealth thin before this walk be done. Only physical gold will see sun after this storm.

A recurring theme in A/FOA's 4+ years of writing was change in nature—the changing of seasons, falling leaves, storms rolling in, coming rains and flooding waters—as well as the nature of change. Here's a fun little story about rain and water:

FOA (08/24/01; 10:54:30MT - msg#101)
A guy begins building his house of wealth in the middle of one of these dry washes. A known gold expert comes along and tells him; "hey buddy, that old stream bed floods from time to time". The Bug says,,,, yea I know, but I only plan to be here for a quick trade or two,,,,, I know it's unstable and washes out every so often,,,,,, taking all paper values with it. I'll just catch some good sun between the rain,,, I'll be ok.

Well,,,, years go by and the rain comes and he gets washed out a few times more than usual,,,,,, but the guy still stays,,,,,, even though the paper gold price keeps getting washed ever lower. Then,,,,,,, a huge unending wash comes even when no rain is falling. After seeing his house of wealth float away with a falling paper price he decides to walk upstream and find out why all this water keeps driving the gold price down??

By god,,,,,,,, miles later he finds a government dam that suddenly started releasing tonnes of water all the time. He raised hell and said it wasn't right,,,,,, but the man at the valve said they aren't doing anything any different than what this type of "paper market"-- I mean stream bed,,,,, was built for. This is a derivatives market, son,,,, meant for betting on the flow,,,, not building a house from it!

If all the public is just speculating on when the rain will fall,,,, why is it so wrong for the government to do it,,,,,, and help maintain your lifestyle to boot. Besides, if all your gold talk is so right,,,,, then we are catering to gold advocates and making physical prices more reasonable???

But the Bug says,,,,,, hey, this isn't a natural market,,,, I mean stream flow!! This bed was only suppose to flow between natural dry and wet spells,,, like a real free bullion market! In reply the valve man asked,,,,, who the hell told you that??? The Bug answered:

I learned it from My Broker!

And then there were FOA's parting comments, titled "There comes a time":

FOA (11/12/01; 16:31:28MT - msg#132)
There comes a time

There comes a time in all things when one must do nothing and simply wait. This is an ages old truth that crosses all the boundaries of life's endeavors; for everything is not always in the doing, but also in the watching. Any good farmer knows that he does not grow a crop; he only prepares his field so the growing, he knows is coming, can take nature's course.

My friends, we have crossed time and space, while plowing these fields of understanding, and the unfolding drama before us must now sprout its own life. For now, it is my time to watch the trail and let the crop develop. Indeed, it will and it will do so for all to see.

Enough has been said to prove our reasoning is true, especially when the fields become full and in a shade of physical green only our seeds will produce. And planted them, we did, by hand, one at a time, over many years.

Enough has also been said about myself as this story was never about me; perhaps too much untruth was also said by others?

I am going to travel for a while and watch the trail from a distance. It won't be long before the rains come and the ground begins to open; in that time I will return. Until then; this farmer will rest from this work.

Thank you USAGOLD and all the fine people that make this media the best gold site in the world! Another time, we WILL hike again.

Sir Douglas
Your Trail Guide

FOA (12/16/01; 15:27:34MT - msg#133)
(No Subject)

Seasons Greetings and a Happy New Year to the entire USAGOLD GROUP. Certainly, this includes every reader / lurker at the forum, hikers on the Gold Trail and the staff at CPM!

Of course, the largest thanks must go to Mr. Michael Kosares; as this media would not exist without his enormous efforts. Thank you Michael (smile)!

We rest from discussion during this holiday season; a season that also happens to be ushering in one of the most dramatic financial changes the world has seen in our time. As the rains arrive and our crops begin to grow :

---- "We watch this new gold market together, yes?" -----

A happy (smile) to all!

What do you think FOA meant by "the rains"? I don't think he was referring to a 10-year bull market in gold and silver (and the rest of the metals as well). Anyway, that has already come and gone, and surely you remember this storm reference:

"However, everyone that is positioned in physical gold will carry this storm in fantastic shape. This is because the ECB has no intentions of backing their currency with gold and every intention of using gold as a "free trading" financial reserve. None of the other metals will play a part in this."

So what do you think constitutes "the rains" in FOA's parting comments? I have my own idea, but I think there's a good chance that, by some point in 2014, we'll all be able to identify "the rains". That's why I dubbed 2014 the "Year of the Rains". With the fragile system edifice now wholly unsupported, the window open, and all forms of "gold" despised by Western investors even as the East is importing record amounts of physical, I'd say it's high time the rains come and the ground begins to open. It's been coming for some time. And with a little good fortune, maybe, just maybe… :D

Happy New Year to all of you! All the best—and try to stay dry—in 2014... Year of the Rains!



«Oldest   ‹Older   201 – 232 of 232
S P said...

There is risk with any form of gold ownership.

I use GoldMoney. I wouldn't waste time with storing individual bars and coins with others. You can't do it if you're not a giant, you get wiped out by transaction and storage fees, and a currency hyperinflation would kill you.

Might as well take possession.

Dim said...

"I am going to travel for a while and watch the trail from a distance. It won't be long before the rains come and the ground begins to open; in that time I will return. Until then; this farmer will rest from this work."

Should we be expecting an appearance by FOA some time soon?

And Y said...


Yes, perhaps that's what FOFOA meant by the Year of the Rains. It's the year FOA returns. That'd be fun.

Michael dV said...

interesting thought!

Silex Crow said...

One can read this here.FWIW

....P.S I nearly forgot to mention. Having met and known who FOA is for the past 8 years (and having recently divulged that info -for the first time ever- to the one individual who I consider most deserved to know it, and who I am certain will never disclose it), I recently identified Another. You'll be pleased to hear he is alive and well. If Freegolders are enjoying the taste of vindication, imagine for a moment how both Another and FOA must be feeling. Freegold Vindication Factor: off the scale!!

Roacheforque said...

A question for the year of the rains? Will the paper market have serious 100 dollar intraday convulsions or will it quietly go off to do it's own "derivative thing" while physical is gradually repriced in the new Eastern markets?

Either way, I think the paper is going to get wet.

Zebedee said...

@ Pete T

Paper games and very abrasive to boot.

Beer Holiday said...
This comment has been removed by the author.
MatrixSentry said...

Grumps droppings gone like they were never here. Gary's psychotic slime mopped up spic and span. Our host keeps this blog presentable with fastidious care.

Please help when you can. The donate button is always a nice option. Another is to simply ignore the messes that are temporarily deposited on our blog. In the end it means less clean up duty for FOFOA.

Just as with an individual who shows up at a party uninvited, who proceeds to insult your invited guests, and then squats to crap in the middle of your living room, there is no reasoning with such an individual. A person like this is a pariah in society and can only have a life here on the internet antagonizing others. Why give such a freak the life it seeks?

Don't think that it is easy to banned from this blog, it isn't. You really have to work at it. In fact, a normally adjusted and functioning individual, you know, someone with friends and neighbors that will actually say something positive about him, will find it impossible to be banned by FOFOA.

I suppose that one might be tempted to rationalize an interaction with one of these cretins as a means to present support for the concepts articulated by Another/FOA/FOFOA. While the intent is honorable, the result is disappointing. The Troll only concludes that taking a crap in the middle of our living room provides pleasure. The pleasure centers in its twisted brain our stimulated and the Troll returns again and again for its "fix". Trolls even enjoy being insulted. Simply, nothing productive can come as a result of acknowledging these sick individuals.

Even this post will stimulate a gland, which will emit a chemical, which will then make it into the hyper-functioning pleasure centers within a troll brain devoid of human compassion. I post only because I have quite a bit of experience with psychopaths.

I have known three and it took me a long time to understand their behavior. It is difficult for normal people to reconcile a psychopath. Most people simply avoid them, assuming they are simply "bad", which gives the psychopath a huge advantage. See, even bad people can serve a functional purpose in society. Psychopaths aren't really sick. The assumption is that sickness can somehow be managed or cured. Closer to the truth, they are just different, lacking the essential component that makes them human. They are another species, akin to a really smart animal.

This blog has a lot of credibility. Please help our host maintain that credibility. This blog is unique for very good reasons. We are not The Burning Platform or Zerohedge. I invite people to come here and many are stepping out of their comfort zones when they come here for the first time. I do not want them to have to wade through a psychopath's sewage, and then wonder if the effort is worth the time.

Thank you.

DP said...



Willy Half-Nelson

Roacheforque said...

Somehow that visual of someone crapping in the middle of the floor in my living room during an intellectual gathering leaves me with an audible chuckle.
It is quite true that lately the occasional troll gets much more of the attention and recognition it craves than the occasional poster with an intersting link, question or comment, which gets overlooked.

So the comments section suffers, despite FOFOA's excellent janatorial services.

I expect this comment to simply be ignored, like the rest, since it is not abrasive, confrontational, part of an offf-topic diversionary cutsie comment sub-thread, heavily weighed into complex technicals or outright idiotic.

We reap what we sow.

DP said...


jojo said...

"One can read this here.FWIW"

I think it's worth this much

Biju said...

jojo : you just spoiled my appetite for breakfast after that "worthy" link. hugh.....

Biju said...

That image has gotten into my brain now and I cannot get it now. Now I want to know if it was photo shopped :-)

Biju said...

That image has gotten into my brain now and I cannot get it out now. Now I want to know if it was photo shopped :-)

KnallGold said...

So the SNB booked a loss of 9billion sFr.'s last year because Gold incurred a hefty minus figure of 15billion. This gave quite a stirring as the governments usually receive a share of profits which now falls away. It puts several budgets from plus to minus, also from red-green canton governments.

Thomas Jordan said that the Gold price is volatile so it's no surprise. One could argue now all have an interest in higher Gold prices. But it was also brought into discussion that budgets should not rely on speculation on Gold price in the first place.

Wondering how this should be in a FG environment where the price won't move much and if the yield of the SNB on its Gold holdings really should be payed to the gov. !?

DP said...

"yield of the SNB on its Gold holdings" ?

DP said...

But but… dead asset!

KnallGold said...

yeah but what if its bought or sold? HMS Gold initiative doesn't want it but FG might ask for it. Of course, personally, I think wealth and tax is an oxymoron in the first place ...

But right now SNB DOES distribute "yield". Just read that a political initiative wants that budgets are set up WITHOUT that position, though...

De-link the reserve from trading and speculation (and spending..).

My music discovery of 2013, cool indy bunny and apropos title Low Sea-Last Rain

And we want our GLD update now !

DP said...

If it's sold, then it leaves the assets side and the gain/loss is real.

Profit? Capital & reserves increases.

Loss? Capital & reserves decrease.

Motley Fool said...


That was a decent article. I did not however experience any cognitive dissonance as this theory of freegold is not faith based but based on reasonable arguments.

I am sorry that you are either too stupid or lazy to understand the arguments presented.


Robert Mix said...

Gary, I do not know how long your comment will be here for all to see, but here is how I would respond:

Blessed are the peacemakers: for they shall be called the children of God.

Matthew V:9

The Divine is within you, within me, and within us all.

Sherlock said...


Reasonableness of the arguments aside, we place faith in the words that FO/FO/A have provided over the years. We do this in hope they are leading us to prosperity through understanding of an ancient knowledge the world has forgotten. The money concept is faith (trust) based. Logical, rational, and reasonable arguments mean nothing at this current time. We may feel the revaluation is forthcoming and inevitable, but the Christians feel the same way about the second coming of Christ. How long have they been waiting? Were they misguided? Did they place too much faith in the words of men?


Motley Fool said...


I am certain there are those here who do rely on faith. For that reason the criticisms of cultish behaviour is not unjustified.

However, I do not number among them. I am not a man of faith.

You seem too be however.

"Reasonableness of the arguments aside" is not a reasonable statement, especially given your moniker.

" The money concept is faith (trust) based."

This is incorrect, in the sense that you imply.

"Logical, rational, and reasonable arguments mean nothing at this current time."

This is insane. There is no time when such are meaningless.

"We may feel the revaluation is forthcoming and inevitable, but the Christians feel the same way about the second coming of Christ."

There is no 'feeling' involved, unless faith is involved. Also, the frequent use of the world 'inevitable' here should not be misunderstood to mean certain, simply very highly probable, though the latter is a mouthful and hence passed over in favour of a word with almost the same meaning.


Ps. I would consider it a personal favour if you were to change your moniker. I quite like the fictional character, and your words make a mockery of his id.

Pps. @All - Recently started watching a new series Elementary, with a modern day Holmes. Very entertaining and has my recommendation. :)

Nickelsaver said...

Faith is a loaded term, much like money. It begs to be defined before it is used in the understanding of a complete thought regarding it. Faith is nothing more than the inverse of doubt. I have faith that my car will start in the morning. With this cold weather, my faith gives way to doubt.

Faith is not the inverse of logic. Rather, faith is derived from logic. Faith is not synonymous with feelings, although faith may in fact give rise to feelings. For instance, I feel really good about saving my excess in physical gold. Why? Because I have faith that its value will hold the course despite what I see on the surface (the paper gold market). And that faith comes from the logic and reasoning of the Freegold lens.

To an outsider, one that has never peered thru that lens, it appears to be "blind faith". The same goes for the faith that I have in God. From the perspective of many, it appears to be blind. But there certainly is a Christian lens, as I can attest. And there is logic and reason at the center of that lens. And for those that would dispute the nature or quality of my faith, having no faith in God themselves, I would say that they are not qulified to make that judgement, in the same way that someone who has never peered through the Freegold lens is not qualified to judge the merits of Freegold.

Finally, to say, "I am not a man of faith" is really an incomplete statement. Everyone exhibits faith. At least, my definition of faith. It would be more correct to say, "I am not a man of Faith in God".

With that, I have faith that FOFOA will delete all of the trolls comments. And I feel good about that!


Sherlock said...


Thank you for your rude erudition.

Your implication that I am a man of faith is true and false. I was at a younger time in my life, but rationality, personal conviction, and the unwavering belief that what I was raised to believe (Christianity) seemed unbelievable, won the day. I still have faith in other aspects: humanity, love, Peyton Manning.

You profess to be a man of no faith, but that makes you a hypocrite. How many times have you quoted the words of FO/FO/A? How many times have you used the rationalizations and arguments of others on this blog or other analysts on the internet. How can you possibly say you don't have faith?


faith (fth)
1. Confident belief in the truth, value, or trustworthiness of a person, idea, or thing.
2. Belief that does not rest on logical proof or material evidence. See Synonyms at belief, trust.
3. Loyalty to a person or thing; allegiance: keeping faith with one's supporters.
4. often Faith Christianity The theological virtue defined as secure belief in God and a trusting acceptance of God's will.
5. The body of dogma of a religion: the Muslim faith.
6. A set of principles or beliefs.

None of those definitions resonate with you?

I appreciate your picking my response apart and providing such in-depth criticisms as:
"This is incorrect, in the sense that you imply." &
"This is insane. There is no time when such are meaningless."

How is the money concept NOT faith (trust) based? What sense was I implying? If you're trying to trade labor for a monetary medium of exchange, you're putting faith in the money's ability to be readily accepted for desired goods or services, no?

There is no time when logical, rational, and reasonable arguments are meaningless? I must have missed the history lesson in which human civilization made the quantum leap from religious mythology to a completely logical, rational and reasonable existence.

Finally, I'd like to express my gratitude towards your contributions to this blog. That's not meant to be a slight, it's true. You do provide value. However, the aggressive nature of your response was insulting, and I will not be changing my moniker to suit your desire.

"I ought to know by this time that when a fact appears to be opposed to a long train of deductions it invariably proves to be capable of bearing some other interpretation."
- Sherlock Holmes "A Study in Scarlet"

"I confess that I have been blind as a mole, but it is better to learn wisdom late than never to learn it at all."
- Sherlock Holmes Quote "The Man with the Twisted Lip"


Motley Fool said...


I apologize that my reply came across as rude. No doubt some of my annoyance at our resident troll spilled over into my words.

In your analogies drawn I took you to imply something along the lines of the second meaning offered. To this I objected.

Note that the first is belief in not belief of something. The others are also circumstantial linguistically curious definitions. It is a loaded word to be sure.

As a human being, it is nigh impossible not to exercise faith in some aspects. I do for example have faith that the sun will rise tomorrow, but I realize that there exists a small possibility that it will not. In this sense, I have faith.

The concept of money, as explained in the post Moneyness, is that of relations of value. It is not a matter of faith.

I will grant that trust, or faith if you will, in continued value of such a medium is required for it to be of use, but this falls in the same category as that of the sun rising, especially in a freegold environment, and less so today.

I did not claim we live rationally, or that irrational things do not occur, but even here it is possible to rationalize the irrational, the madness of crowds.



Chaplain Dave Sparks said...

Excuse me if I'm posting my initial questions in the wrong question, but here are a few initial ones:

1.) Does the concept of freegold divert "investment" money from what are called "profitable" investments, such as businesses, or reduce the lendable funds in the banking system?

2.) Ass-u-ming I live in a country where I'm already permitted to buy/sell/own gold, do structural changes need to be made, or is it just my mindset as a saver/investor.

3.) Would there be any intermediate forms available, such as bank accounts denominated in gold, or do I have to convert fiat currency into or out of gold to buy something? I'm mainly concerned about the risk of transporting and storing gold.

4.) Would this require repeal of "legal tender" laws so that contracts could be denominated in gold and be legally enforceable as such.

5.) Given the high cost per unit of gold, could silver be used as a proxy? What about silver coinage to "make change"? If not, is there a practical way to make gold practical, such as small denomination coinage with a very low percentage of actual gold?

To sum up, I'm looking for the advantages of freegold over merely making gold be *THE* world's money and be done with it?

Anonymous said...

@Chaplain Dave Sparks


Indenture said...

1. No
2. No
3. No
4. No
5. No
Hard money doesn’t work.

Motley Fool said...


1. No and no.

2. Well, for many countries a slight change in central bank accounting would be needed. That's about the size of it.

3. No. We project that storage solution company's will proliferate to negate that risk for the everyman.

4. No. Contracts will not be denominated in gold.

5. No. Gold will not be used as money.

Many, but you have a long road ahead to overcome all that hard money baggage.

Perhaps try this for a start :


«Oldest ‹Older   201 – 232 of 232   Newer› Newest»

Post a Comment